1. Field of the Invention
This invention relates to inventory management and, more particularly, to analysis of inventory metrics or measurements of inventory health.
2. Description of the Related Art
In order to offer customers a variety of items readily available for delivery, many merchants (whether engaging in electronic or conventional “brick and mortar” commerce) hold various quantities of such items within inventory facilities. Keeping items in inventory may serve to buffer variations in customer demand or a manufacturer or distributor's ability to supply various items. For example, different items offered for sale by a merchant may have different manufacturer lead times. Holding quantities of such items as inventory may enable a merchant to offer consistent availability of these items to customers despite the different lead times.
Many merchants employ conventional inventory management schemes that attempt simply to ensure that the inventory on hand is sufficient to cover expected customer order volumes for a particular period of time. That is, such conventional inventory management schemes focus on whether there is enough inventory on hand to meet projected demand. However, storing inventory is not without cost. For example, providing a physical facility in which to store inventory presents recurring infrastructure costs directly attributable to the inventory items stored in the facility. Further, while items are in storage awaiting sale, debt or capital costs associated with acquiring the items may accumulate. Items being held in inventory may also depreciate, become obsolete, expire or spoil (e.g., in the case of perishable items), become damaged, or otherwise incur costs attributable to holding. When these various inventory holding costs are considered, having too much inventory may also be a concern, as accumulating costs may erode inventory value.
However, taking holding costs into account when optimizing inventory presents challenges. The price paid to acquire a given amount of inventory typically represents a sunk cost that may not correlate with the current value of that inventory, which may obscure actions that may be necessary to maximize the current inventory value. Further, the problem of maximizing inventory value is complicated by purchase opportunities that, on their surface, may appear to be desirable, but which may actually have a deleterious effect on overall inventory value.